Removed? Hell no.
Altered? I agree.
It's there for a few purposes, but my favorite is it is sort of an anti-bot measure. Though, if people vend said items, the price on them will be cataclysmic, I can understand the reasons why this method exists. Though for people that NEED to farm for certain items like elemental stones, this can be very troublesome and harsh on players. I think if you're 15~ levels LOWER then the monster, then the current rates are fine, but if you're 5~10~17 levels above it, the drops should be a bit more frequent.
Also, do these rates apply to MvP loots?
And I actually think the leveling system is fine as is. It stops power leveling and game breaking leveling methods (We've suffered those for a long LONG time now, so now people are used to it and demand the same.)
How do you propose a level 150 char farm items they need from a level 30 ish mob?
I'd suggest anyone that is FOR the drop penalty go play a game where it makes sense like Aion, Rising force etc. Take a good look at these games, because they have a myrad of ways for high level players to get low level loot without needing to make new chars like they're rolling god seals.
They generally revolve around being able to break down something dropped by a lvl 150 mob into a lower tier of item. RO doesnt have tiered items like that, and they dont seem to have put any thought into how players can gain these items.
The exp thing is fine, I think most players agree with that one. You can level on much higher stuff if you want to, infact the way its set up, anything higher than your "ideal" target monster gives roughly the same exp as your ideal mob after the exp penalties. For example while doing Henry's Marduk quest at lvl 70ish, I stopped in to kill some anubis which gave the same exp as marduk approximately.